Target: ₹140

CMP: ₹128.80

Indian Oil Corporation Ltd (IOCL) is an established PSU in Indian oil refining and marketing business with 11 refineries, refining capacity of 80.6 MMT which accounted for 32.5 per cent of India's refining capacity as on March 31, 2021, and held about 39 per cent share in India's petroleum products market in FY21.

The demand for petroleum products in the current fiscal has witnessed some recovery compared to the preceding fiscal but remains lower than the pre-Covid levels. Elevated crude prices may adversely impact the demand recovery witnessed in the recent months. The benchmark Singapore gross refining margin (GRM) has witnessed improvement in the recent months. However, high crude prices as well as subdued global demand may adversely impact the GRM.

IOCL expects to add 1,000 outlets and also invest on upgrading existing outlets in fuel retailing. IOC is already setting up EV charging centers and forming partnership for green hydrocarbon. Most of the new outlets will be added in class ‘B’ towns at a lower cost per outlet typically ₹0.50- ₹1 crore. The annual capex will go towards this expansion and support infrastructure like tankages, pipelines and surveillance as well as technology.

Given healthy growth outlook and strong set of numbers in Q4FY22, we have now revised earnings and increased target price for the stock (base case: ₹140 & bull case: ₹150).

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